Friday, December 23, 2011

Why Is Macro So Hard: Do Policymakers Care That They May Not Know What They’re Doing?

… Because, I am a soulless technician who will faithfully advise anyone and everyone who asks I see the back rooms of opposing lobbyists all the time.

Here at the state level I can safely say that virtually no one has any idea what they are doing. That is, for the most part the lobbyist do not know and indeed are not particularly interested in what is in the best interest of their clients.

Further, this seems to stem from the fact that the clients are not particularly interested in what is in their best interests.

What they are very interested in is whether legislation is pro them or anti them. However, if you begin to talk about the economy as a complex system full of unintended consequences where anti legislation could be in their best interests their eyes glaze over.

Moreover, a very large number of business lobbyists are not even that interested in efforts that are pro or anti their business. They are more interested in legislation that is pro-business in general and that they perceive as being fair.

There are some notable exceptions but I will not name names.

My sense is that there is a huge but odd policy lesson here. I am still working to untangle what it is.

I like to think of this as the favorite team effect. For many people, correct and incorrect are not important when it comes to their favorite team: think about how Americans feel about their own Olympic sports teams.

In policymaking, what be most important to the positions people hold is whether they are perceived as being pro or con. Once the evidence, as perceived, starts to tilt towards the pro side, the task becomes to accentuate the pros and diminish the cons.

Thus, Republicans come to be in favor of essentially all tax cuts. And Democrats come to be in favor of essentially all social programs.